On December 11, 2015, two days after hearing oral arguments in
an appeal from an ITC determination finding trade secret
misappropriation, the Federal Circuit summarily affirmed the
ITC's decision. Sino Legend Chemical Co., v. International
Trade Commission, No. 2014-1478 (Fed. Cir. December 11, 2015).
The primary issues raised on appeal were: (1) whether the ITC can
block the importation of products resulting from trade secret
misappropriation occurring entirely outside the U.S.; and (2)
whether the ITC should have deferred to the judgments of the
Chinese courts that were reviewing the same trade secret
allegations.

SI Group hired two employees at its Chinese facilities, both of
whom had access to SI Group's trade secrets concerning
tackifiers. The employees left SI Group and joined Sino Legend in
China, bringing with them SI Group's formulas for producing
tackifiers. Shortly thereafter, Sino Legend began producing its own
tackifiers and importing them from China into the U.S.

SI Group brought multiple actions against Sino Legend for trade
secret misappropriation in China. These included criminal and civil
investigations. The civil investigation resulted in a ruling that
Sino Legend had not misappropriated protectable trade secrets. The
ruling was affirmed on appeal.

SI Group also filed an ITC Complaint under Paragraph (a)(1)(A)
of Section 337, which renders unlawful the importation of goods
stemming from "[u]nfair methods of competition and unfair acts
in the importation of articles...into the United States." As
the Federal Circuit held in TianRui Group Co. Ltd. v. ITC,
661 F.3d 1322, 1327 (Fed. Cir. 2011), trade secret misappropriation
is a form of unfair competition encompassed by the statute.
Moreover, TianRui specifically held that Section 337
encompasses trade secret misappropriation that occurs abroad.
Id. at 1335 ("To bar the Commission from considering
such acts because they occur outside the United States would thus
be inconsistent with the congressional purpose of protecting
domestic commerce from unfair methods of competition in importation
such as trade secret misappropriation").

In Rubber Resins, the Administrative Law Judge issued a
final initial determination finding a violation of Section 337 for
trade secret misappropriation and recommending a 10-year general
exclusion order (GEO), or alternatively, a limited exclusion order
(LEO) directed to a number of named individuals and companies that
manufacture, distribute, and import the accused product. The Judge
did not afford comity or give deference to the Chinese litigations,
one of which was co-pending at the time.

The Commission adopted the Judge's findings and issued a
10-year LEO. The Commission declined to dismiss the case for comity
to the Chinese court, stating in a footnote that "abstention
and international comity do not relieve the Commission of its
statutory responsibility to determine whether there is a violation
of Section 337." Sino Legend appealed the Commission's
decision to the Federal Circuit.

Oral Argument

The Federal Circuit panel consisted of Judges Reyna, Mayer, and
Chen. The panel focused on two primary questions:

Comity – did the ITC err by not considering judgments
from Chinese courts that litigated SI Group's trade secret
allegations?

Extraterritoriality

Sino Legend

TianRui held that the ITC has the power to block the
importation of goods derived from trade secret misappropriation
occurring outside the U.S. In its briefing and during oral
argument, respondent Sino Legend urged the Federal Circuit to
reconsider TianRui in view of the intervening Supreme
Court decision in Kiobel v. Royal Dutch Petroleum Co., 133
S. Ct. 1659, 1664 (2013). According to Sino Legend, Kiobel
states that a statute can only apply extraterritorially when it
includes a clear indication of extraterritoriality. Sino Legend
argued that Section 337 does not clearly indicate that it should
reach conduct occurring wholly outside of the U.S.

During Sino Legend's oral argument, Judge Chen observed that
in Kiobel, the conduct being regulated or policed occurred
entirely overseas, whereas in Section 337 proceedings at the ITC
(as addressed in TianRui), the focus is on domestic
matters – i.e., a domestic injury triggered by the domestic
act of importation, with a domestic remedy. In response, Sino
Legend pointed to the dissent in TianRui, which stated
that in addition to importation, Section 337 investigations involve
an unfair method or act in connection with the importation. Sino
Legend argued that to count unfair acts occurring anywhere in the
world as triggering violations under Section 337 would constitute
an improper extraterritorial application of the statute that cannot
be upheld in the absence of explicit statutory language confirming
its extraterritorial application.

Judge Reyna asked why Kiobel did not explicitly
overrule TianRui. Sino Legend responded that Section 337
was not before the Supreme Court in Kiobel. Judge Reyna
then asked why the Federal Circuit should presume that
Kiobel reaches TianRui. Sino Legend responded
that the Federal Circuit should revisit TianRui because
its rationale is undercut by Kiobel.

The ITC

During its arguments, the ITC relied on the holding in
TianRui, which stated that Section 337 does not regulate
foreign conduct and does not apply extraterritorially; the statute
instead applies to importation and economic injury in the U.S.
Thus, Kiobel's holding regarding extraterritoriality
is not relevant to TianRui and Section 337.

SI Group

Complainant and intervenor SI Group separately argued that Sino
Legend's briefs to the ITC did not address extraterritoriality,
and that Sino Legend raised this issue for the first time on
appeal.

Comity

Sino Legend

Sino Legend argued that the ITC committed error by failing to
consider whether to accord comity to the decisions of Chinese
courts regarding the trade secret allegations. According to Sino
Legend, the ITC concluded that comity has no role to play in an ITC
proceeding. Sino Legend argued that the case should be remanded to
allow the ITC to consider the various factors to determine whether
to grant comity to the Chinese proceedings.

Judge Reyna noted that comity is discretionary and that the ITC
is not obligated to accord comity. Sino Legend responded that there
is no mandate that the ITC defer to foreign decisions, but the ITC
must apply the applicable test to determine whether or not to
accord comity. Judge Reyna observed that whether to defer to a
foreign judgment requires a due process analysis regarding the
foreign proceedings, and asked whether there had been a factual
finding that the Chinese proceedings were unfair. Sino Legend
responded that the ITC did not make any such factual findings.

On rebuttal, Judge Reyna asked Sino Legend why it did not submit
additional arguments on fairness and due process of the Chinese
proceedings, including the factors that courts examine when
deciding whether to defer to a foreign judgment. Sino Legend stated
that its submission of the Chinese judgments met its prima
facie burden, and that although Sino Legend raised comity
generally in its Petition to the Commission, the Commission did not
request briefing on the comity issue.

The ITC

Judge Reyna asked if there were arguments made at the ITC that
the Chinese proceedings were unfair. The ITC responded that Sino
Legend never submitted evidence supporting the according of comity
to the Chinese judgments and did not preserve those arguments. When
the Commission reviewed the case, there was no evidence regarding
comity in the record and no evidence about the fairness or
unfairness of the Chinese judicial system.

Judge Chen asked about the ITC's position on comity and
whether it flatly rejects comity. The ITC responded that Sino
Legend raised comity late in the proceedings and did not include
substantial arguments or evidence. In future cases involving
comity, there might be "a little bit of wiggle room" for
a party who makes substantial arguments in a timely manner.

SI Group

SI Group said they did not interpret the ITC's decision as
precluding comity in all cases. In this case, Sino Legend did not
raise the issue of comity in its briefs to the Commission.

Judge Reyna asked if there was any discussion or argument in the
proceeding as to due process in China. SI Group said that its brief
included a discussion on procedural issues in the Chinese case, and
referenced an ITC report regarding the effects of intellectual
property rights infringement in China and China's indigenous
innovation policies. By contrast, Sino Legend relied on a law
review article that SI Group characterized as a "marketing
fluff piece."

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

The Ninth Circuit held last month that a nonexclusive agent for photographers lacked standing to bring a copyright infringement action on behalf of the photographers for a third party's alleged infringement.

In Helsinn Healthcare S.A., v. Teva Pharmaceuticals USA, Inc., the Federal Circuit interpreted, for the first time, what constitutes an "on-sale" bar under 35 U.S.C. 102(a)(1) of the Leahy-Smith America Invents Act.

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